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Morning Bid: China stimulus gets mixed reviews
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Morning Bid: China stimulus gets mixed reviews
Oct 15, 2024 9:44 PM

A look at the day ahead in European and global markets from Rae Wee

Beijing's latest stimulus pledges were met on Monday with a mixed and volatile response in Chinese stocks, with investors showing no consensus view on promises over the weekend that were long on intent but short on details.

Hong Kong shares got off to a choppy start before turning decisively lower, in contrast with their peers in mainland China which mostly traded higher.

Some analysts attributed the divergent performance to the lack of a dollar figure for the package, which may have mattered more to foreign investors than to their Chinese counterparts.

The sweeping measures - from helping local governments tackle their debt problems to supporting the property market and replenishing state banks' capital - underscored policymakers' commitment to supporting the ailing Chinese economy.

But the limited scope of efforts to boost domestic consumption remains a huge concern for investors, particularly after data on Sunday showed China's consumer inflation unexpectedly eased in September while producer price deflation deepened.

The mixed picture across Chinese markets on Monday has set a negative tone for Europe, where EUROSTOXX 50 futures and FTSE futures both fell around 0.1% each.

Shares of European luxury goods companies will be in focus given the attention to China, with a gauge of 10 top European luxury stocks already up nearly 9% since Sept. 24, when Beijing unveiled its most aggressive stimulus since the pandemic.

The week also brings a raft of data from China, including the country's third-quarter growth figures on Friday, so there will be lots for investors to chew on in the coming days.

China aside, a rate decision by the European Central Bank is due on Thursday, where expectations are for policymakers to deliver a 25-basis-point rate cut. UK inflation data is due on Wednesday.

Remarks from the Federal Reserve's Neel Kashkari and Christopher Waller are expected later on Monday, and there is strong interest in what they might say about the central bank's rate outlook.

An outsized 50-basis-point rate cut next month is now off the table, given signs of a resilient U.S. economy, and that's kept the dollar well-supported and hovering near a seven-week high against a basket of major peers on Monday.

Key developments that could influence markets on Monday:

- Fed's Kashkari, Waller speak

- France reopening of 3-month, 6-month, 7-month and 1-year government debt auctions

- Germany reopening of 1-year government debt auction

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